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TMI Blog2023 (11) TMI 1321X X X X Extracts X X X X X X X X Extracts X X X X ..... cord duly considered in light of Rule 18(6) of the ITAT Rules. 4. The common challenge in all the appeals by the assessee relates to the approval obtained u/s 153D of the Income-tax Act, 1961 [the Act, for short] on the ground that it is not only mechanical but also without application of mind which makes the impugned assessment order non-est. 5. The other grounds in the appeals of the assessee are on merits of the case. But since the challenge to the approval goes to the root of the matter, we decided to adjudicate it first. 6. The bone of contention is the approval dated 30.12.2018 which is as under: Office of the Addl. Commissioner of Income Tax, Central Range-5, 1st Floor, Room No. Room No. 101 A.R.A. Centre, E-2, Jhandewalan Extn. New Delhi-110055 No. Addl. CIT/C.R-5/1530/2018-19/1045 Dated. 30.12.2018 The Assistant Commissioner of Income Tax, Central Circle-20 New Delhi. Sub: Approval u/s 153D of the Income Tax Act, 1961 for making assessment u/s 153A/143(3)- Nayyar Group of cases.- reg. Ref: Your letter F.No. ACIT/CC-20/1530/2018-19/3628 dated: 30.12.2018 Please refer to your letter mentioned above, whereby you have submitted draft assessment orders to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd, hence, they are left open. 16. In the result, all the appeals of the assessee are allowed and the appeal of the Revenue for AY 2015-16 is dismissed." 8. The co-ordinate bench in another batch of 111 appeals in group cases of MDLR Hotels Pvt Ltd had an occasion to consider a similar challenge to the approval u/s 153D of the Act and held as under: "13. We have given thoughtful consideration to the orders of the authorities below and have carefully perused all the relevant documentary evidences brought on record. We have also gone through each and every approval granted by the Additional Commissioner of Income tax, Central Range - 2, New Delhi vis-a-vis, each and every proposal made by the DCIT, Central Circle-15, New Delhi. 14. The issue which we have to decide is, can these approvals be treated as fulfilling the mandate of provisions of section 153D of the Act vis-à-vis legislative intent of the said section in the statute. Section 153D of the Act reads as under: "No order of assessment or reassessment shall be passed by an Assessing Officer below the rank of Joint Commissioner in respect of each assessment year referred to in clause (b) of section 153A or the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the basis of seized materials, the superior authorities have to approve the assessment order. 17. The question before us is "has this been done in the present case". The language of the approval letter says "no". 18. In light of the afore-stated relevant provisions and legislative intent, approval dated 08.03.2013 is in respect of 62 assessment orders as exhibited at pages 136 and 137 of the Index to Convenience Compilation furnished by the ld. counsel for the assessee. Approval dated 15.03.2013 is in respect of 37 assessment orders as exhibited at pages 138 and 139. Approval dated 18.03.2013 is in respect of 54 assessment orders as exhibited at pages 140 and 141. Approval dated 21.03.2013 is in respect of 24 assessment orders as exhibited at pages 142 and 143 and approval dated 25.02.2013 is in respect of 69 assessment orders as per exhibits in the Convenient Compilation. 19. Thus, the worthy Additional Commissioner of Income tax, Central Range - 2, New Delhi gave approval to 246 assessment order by a single approval letter u/s 153D of the Act by mentioning as under: "The above draft orders, as proposed, are hereby accorded approval with the direction to ensure that the o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ia Vs CIT 169 Taxman 328 wherein at para-6, the Hon'ble Supreme Court observed as under: "A bare perusal of the provisions of sub-section (2A) of the Act would show that the opinion of the Assessing Officer that it is necessary to get the accounts of assessee audited by an Accountant has to be formed only by having regard to: (i) the nature and complexity of the accounts of the assessee; and (ii) the interests of the revenue. The word "and" signifies conjunction and not disjunction. In other words, the twin conditions of "nature and complexity of the accounts" and "the interests of the revenue" are the prerequisites for exercise of power under section 142(2A) of the Act. Undoubtedly, the object behind enacting the said provision is to assist the Assessing Officer in framing a correct and proper assessment based on the accounts maintained by the assessee and when he finds the accounts of the assessee to be complex, in order to protect the interests of the revenue, recourse to the said provision can be had. The word "complexity" used in section 142(2A) is not defined or explained in the Act. As observed in Swadeshi Cotton Mills Co. Ltd. v. CIT [1988] 171 ITR 634 1 (All.), it is a n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s granted by the Chief Commissioner of Income tax but merely one G. P. Agarwal was nominated. An argument has been advanced to the effect that by making such a nomination, approval will be deemed to have 9 ITA. No.4061/Mum/2012 been granted. The answer to the said contention must be rendered in the negative. The Chief Commissioner of Income tax before granting such approval must have before him the materials on the basis whereof an opinion had been formed. A prior approval can be granted only when the materials for appointment of the extraordinary procedure is required to be taken by the Assessing Officer. The Assessing Officer, therefore, was required to place all materials before the Commissioner of Income-tax or the Chief Commissioner of Income- tax, as the case may be, to show that he intends to take recourse to the said provision having regard to the nature and complexity of the accounts of the assessee and the interests of the Revenue. No such materials had been placed before the Chief Commissioner of Income-tax. It further appears that even no previous approval was sought for but merely a proposal was placed for perusal of the Chief Commissioner of Income-tax and for appoi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal in the case of Verma Roadways Vs ACIT 75 ITD 183 wherein also the assessee- appellant has challenged the validity of approval to the assessment order accorded by the CIT Kanpur. The Tribunal at Para-47 has held as under: "Coming to the aspect of the application of mind, while granting approval, we are of the view that requirement of approval pre-supposes a proper and thorough scrutiny and application of mind. In the case of Kirtilal Kalidas & Co. (supra), the I.T.A.T Madras Bench 'A' has observed that the function to be performed by the Commissioner in granting previous approval requires an enquiry and judicial approach on the entire facts, materials and evidence. It has been further observed that in law where any act or function requires application of mind and judicial discretion or approach by any authority, it partakes and assumes the character and status of a judicial or at least quasi-judicial act, particularly because their Act, function, is likely to affect the rights of affected persons." 29. Similarly, u/s. 151 of the Act it is provided that no notice shall be issued u/s. 148 unless the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... findings recorded by the Assessing Officer and settingaside the assessment orders on the sole ground of defect in the approval to the draft assessment orders granted by the competent Approving Authority. Learned counsel for the Assessee, however, defended the order of the tribunal for the reasoning given therein. Considering the submissions of the learned counsels for the parties and having perused the order of the Tribunal, in view of the undisputed facts before us about the manner in which the approval to the draft assessment orders was granted under Section 153D for the assessment proceedings, by two letters dated 30.12.2017 and 31.12.2017, in 123 cases placed before the approving authority in two days, we are required to examine as to whether a substantial question of law arises for consideration before us so as to admit the present appeals. To answer the same, we are required to go through the relevant provisions of the Income Tax Act. Section 132 provides the procedure for search and seizure operations in consequence of the information in possession of the Income Tax Authorities. Section 153A prescribes assessment in case of search or requisition. Section 153A provides t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ication of mind on the subject matter approved which satisfies all the legal and procedural requirements. There is an exhaustive discussion on the requirement of prior approval under Section 153D of the Act and it was noted that the requirement of approval cannot be treated as mere formality and the mandate of the Act that the Approving Authority has to act in a judicious manner by due application of mind in a manner of a quasi judicial authority, has been considered. It was held therein that if an approval has been granted by the Approving Authority in a mechanical manner without application of mind then the very purpose of obtaining approval under Section 153D of the Act and mandate of the enactment by the legislature will be defeated. For granting approval under Section 153D of the Act, the Approving Authority shall have to apply independent mind to the material on record for "each assessment year" in respect of "each assessee" separately. The words 'each assessment year' used in Section 153D and 153A have been considered to hold that effective and proper meaning has to be given so that underlying legislative intent as per scheme of assessment of Section 153A to 153D i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 142(2A) of the Act had been made, it was noted that the Apex Court has held therein that the requirement of previous approval of the Chief Commissioner or Commissioner in terms of the said provision being an in-built protection against arbitrary or unjust exercise of power by the Assessing Officer casts a very heavy duty on the said high ranking authority to see that the approval envisaged in the section is not turned into an empty ritual. The Apex Court has held therein that the approval must be granted only on the basis of material available on record and the approval must reflect the application of mind to the facts of the case. The above discussion made in the judgement of Tribunal dated 3.08.2021 in the case of Navin Jain Vs. Dy. C.I.T. (Supra) has been relied by the Tribunal, in the instant case, to arrive at the conclusion that the mechanical approval under Section 153D of the Act would vitiate the entire proceedings in the instant case. For the reasoning given in the case of Navin Jain (Supra), as extracted in the impugned order passed by the Tribunal, as noted above, there cannot be any two opinion to the requirement of prior approval of the Joint Commissioner to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned by the Assessing Officer on the draft assessment order before passing the assessment orders under Section 153A. In the instant case, the draft assessment orders in 123 cases, i.e. for 123 assessment years placed before the Approving Authority on 30.12.2017 and 31.12.2017 were approved on 31.12.2017, which not only included the cases of respondent-assessee but the cases of other groups as well. It is humanly impossible to go through the records of 123 cases in one day to apply independent mind to appraise the material before the Approving Authority. The conclusion drawn by the Tribunal that it was a mechanical exercise of power, therefore, cannot be said to be perverse or contrary to the material on record. As the facts are admitted before us, the questions of law framed on the factual issues related to the findings recorded by the Assessing Officer are not open to agitate within the scope of the present appeals being in the nature of second appeal. No substantial question of law arises for consideration before us. The Appeals are dismissed being devoid of merit." 31. In the present batch of appeals also, the Additional CIT has given approval in batches of 69, 62, 37, 54 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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